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Dropbox has announced plans to cut 20% of its workforce—amounting to 528 roles—as the company faces declining growth in its core cloud storage business.
The move marks the second round of significant layoffs for Dropbox in 2024, following an earlier reduction of around 500 employees aimed at focusing more resources on its AI division. Dropbox’s latest cuts are part of a broader restructuring to streamline operations and shift focus towards AI-driven initiatives, notably the company’s Dash AI search product.
CEO Drew Houston, shared the news in a company blog post titled “An Update from Drew,” emphasizing that the decision was driven by a need to make “more significant cuts in areas where [Dropbox is] over-invested or underperforming.”
According to Houston, the layoffs are also part of a push to create a “flatter, more efficient team structure” as the company realigns its priorities. He noted that the broader market is now beginning to move in the direction where Dropbox has placed its “biggest bets,” including the new AI-powered search tool, Dash.
Growth slowing in cloud storage
The cuts come at a critical time for Dropbox, which has been grappling with a slowdown in user growth for its cloud storage services. In the company’s second-quarter earnings report in August, Dropbox recorded an additional 63,000 paid users, a modest increase relative to its 18 million-plus user-base. The quarter marked the slowest growth in Dropbox’s history, a trend that has negatively impacted its stock performance. As of August, the company’s shares had declined over 20% year-to-date.
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Houston has promised to share more details on the firm’s growth strategy for 2025 in the coming days, aiming to clarify the company’s approach to revitalizing its core business while accelerating the development of new products. The recent layoffs reflect Dropbox’s decision to reduce investment in certain business areas while prioritizing AI-driven advancements.
Employees affected by this latest round of redundancies will receive a generous severance package that includes 16 weeks of pay, equity, a lump-sum bonus, and payouts for approved leave. In addition, Dropbox has pledged immigration support services for workers on visas. Most payouts associated with these layoffs are expected to take place in the fourth quarter of Dropbox’s 2024 fiscal year.
US tech sector challenges
This wave of cuts comes amid a challenging period for the US tech sector, which has been hit hard by economic pressures and shifting market demands. So far in 2024, over 141,000 tech workers have faced layoffs as companies re-evaluate operations and reduce headcounts. The trend has seen tech companies like Dropbox pivot towards AI to capture new market opportunities, even as these strategic shifts necessitate significant workforce reductions.
As Dropbox and other tech firms continue to reshape their business models in response to emerging trends, analysts warn that further layoffs could be down the line. While AI presents promising new revenue streams, the cost of such transformation is becoming increasingly felt across the US tech industry, with significant impacts on workers and communities. Experts emphasize the importance of balancing innovation with robust employee protections, including clear communication and accessible support during workforce reductions.
